BLBG:Yen Drops Versus Peers as Stocks Rally Damps Haven Demand
The euro weakened for a seventh day versus the Swiss franc after Cyprus’s Defence Minister Fotis Fotiou said parliament may not vote on a bank-deposit levy again today, fueling speculation the nation’s bailout will falter.
The 17-nation currency was set for its longest run of declines against the franc in more than two years. The dollar strengthened versus 11 of its 16 major counterparts before the Federal Reserve starts a two-day meeting. The yen fell for the first time in four days against the U.S. currency. New Zealand’s dollar weakened after Finance Minister Bill English said it was overvalued.
“The euro is driven by news headlines as the market is cautious about developments in Cyprus,” said Henrik Gullberg, a currency strategist at Deutsche Bank AG in London. “The uncertainty there will probably weigh on the euro in the near term. But our view is that a big move lower in the euro from here is more likely to be driven by a strong dollar story.”
The euro weakened 0.3 percent to 1.2221 francs as of 8:08 a.m. in New York, set for its longest losing streak versus the Swiss currency since December 2010. It declined 0.1 percent at $1.2944 after dropping to $1.2882 yesterday, the weakest since Dec. 10. The yen slid 0.2 percent to 95.42 per dollar and slipped 0.1 percent to 123.51 versus the euro.
Cyprus’s Fotiou said the government was working on a “Plan B” if the vote isn’t passed in parliament. Efforts are under way on alternatives “to try and get something better for Cypriots,” he told Greek Skai Television.
Bailout Conditions
Euro-area finance ministers said yesterday the island nation must raise 5.8 billion euros as a condition for a bailout, even as they signaled flexibility in applying the levy to small-scale savers.
“The notion of a failed vote knocked the wind out of the euro,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. (WBC) in Sydney. “The clock is really ticking on them. The banks are closed, and the economy can’t function if people can’t get their money.”
The yen weakened amid speculation a new Bank of Japan (8301) leadership that starts tomorrow will press ahead with plans for expanding stimulus.
Japan’s currency declined versus 13 of its 16 major counterparts as analysts at banks including JPMorgan Chase & Co. and Barclays Plc predict the BOJ will add stimulus as soon as the next policy meeting in April.
Dovish Governor
“We are going to have a new Bank of Japan governor soon and the market’s perception of him is that he will be dovish,” said Jane Foley, a senior foreign-exchange strategist at Rabobank International in London. “That’s likely to weigh on the yen.”
BOJ Governor Masaaki Shirakawa steps down today, making way for Haruhiko Kuroda who has pledged to do whatever it takes to counter deflation. In his final press briefing, Shirakawa said that merely expanding the monetary base won’t be enough to end deflation and it’s dangerous for central banks to try to control market movements.
Kuroda will have a veteran of quantitative easing as his top policy planner, after Masayoshi Amamiya was brought back from running the bank’s Osaka branch, the BOJ said in a statement yesterday.
The yen has weakened 17 percent in the past six months, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, after Prime Minister Shinzo Abe pledged to end deflation. The dollar gained 3.4 percent and the euro appreciated 2.4 percent.
Kiwi Falls
New Zealand’s dollar fell for a second day versus the U.S. currency as English said in an interview that there may be a “correction in valuation” as the U.S. economy recovers.
English’s words “at the edge add to some of the bearish tone we’ve seen around the New Zealand dollar,” said Jonathan Cavenagh, a currency strategist in Singapore at Westpac Banking Corp. “I still think the currency is going to be pretty well supported on dips.”
The so-called kiwi declined 0.4 percent to 82.37 U.S. cents after dropping 0.1 percent yesterday.
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net; Kevin Buckland in Tokyo at kbuckland1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
